Builder's Force Majeure Plea for COVID Delay Partially Accepted; Unfair Penalty Clause Struck Down: Chandigarh State Consumer Commission - 2025-01-09

Reliable Legal Information.

Chandigarh Consumer Court Orders Omaxe to Hand Over Delayed Flats, Awards 9% Interest as Compensation

Chandigarh, U.T. – The State Consumer Disputes Redressal Commission has directed M/s Omaxe Chandigarh Extension Developers Private Limited to deliver possession of apartments in its "The Lake" project and pay significant compensation to homebuyers for inordinate delays. The Commission, presided over by Justice Raj Shekhar Attri and Member Mr. Rajesh K. Arya, dismissed the developer's arguments, including the claim that a contractual penalty of ₹5 per square foot was sufficient, deeming such clauses "harsh, oppressive or unconscionable."

The bench held the developer liable for deficiency in service and unfair trade practices for failing to deliver the apartments by the promised date of January 9, 2021.

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Background of the Dispute

Two separate complaints were filed by Ramesh Kumar and Ravinder Avasthi, who had booked apartments in Omaxe's "The Lake" project in New Chandigarh in May 2017. Both complainants had paid over ₹85 lakh each, a substantial portion of the total cost of approximately ₹1.01 crore.

As per the allotment letter dated July 10, 2017, possession was to be delivered within 42 months (36 months plus a 6-month grace period), making the deadline January 9, 2021. However, the developer failed to offer possession, prompting the homebuyers to approach the consumer commission seeking possession and compensation for the delay of over two years.

Developer's Arguments and Court's Rebuttal

Omaxe raised several preliminary objections, all of which were systematically dismantled by the Commission.

• Consumer vs. Investor: The developer claimed the complainants were investors, not consumers. The Commission rejected this, stating Omaxe failed to provide any evidence, and the onus was on them to prove the buyers were indulging in real estate trading.
• Arbitration Clause: The reliance on an arbitration clause was dismissed, citing the Supreme Court's affirmation that such clauses cannot oust the jurisdiction of consumer forums.
• Jurisdiction: The Commission affirmed its territorial jurisdiction, noting that Omaxe had issued payment receipts from its Chandigarh office and the allotment agreement itself vested jurisdiction in Chandigarh courts.
• Force Majeure (COVID-19): Omaxe argued that the pandemic constituted a force majeure event, justifying the delay. The Commission acknowledged the impact of the lockdown but limited the relief. It granted Omaxe an immunity period of nine months, in line with government advisories, extending the possession deadline to October 9, 2021. However, the developer's failure to deliver even by this extended date was deemed a clear deficiency.
• Contractual Compensation: The developer contended that compensation for delay was limited to ₹5 per sq. ft. per month, as per the agreement. The Commission forcefully rejected this argument.

Striking Down Unconscionable Contract Terms

A pivotal part of the judgment dealt with the "unfair and unreasonable" compensation clause in the builder-buyer agreement. The Commission cited landmark Supreme Court judgments, including Central Inland Water Transport Corporation Ltd. vs. Brojo Nath Ganguly and Pioneer Urban Land and Infrastructure Ltd. vs. Gouvindan Raghavan , to reinforce the principle that courts can strike down one-sided contract terms between parties with unequal bargaining power.

The judgment stated, "...it is well settled law that a court can strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between the parties who are not equal in bargaining power."

The Commission found the meagre compensation offered by Omaxe to be substantively unfair and opted to award a more equitable compensation.

Final Verdict and Directions

The State Commission partly accepted the complaints and issued a series of directives to Omaxe, holding the company and its directors jointly and severally liable:

1. Deliver Possession: Hand over the completed apartments, with all necessary occupation and completion certificates, within 45 days.
2. Pay Interest for Delay: Pay compensation in the form of interest at 9% per annum on the entire amount deposited by the homebuyers. This interest is to be calculated from the extended due date of October 9, 2021, until the actual date of delivery.
3. Compensation for Harassment: Awarded each complainant ₹1,00,000 for mental agony and harassment.
4. Litigation Costs: Ordered Omaxe to pay ₹35,000 to each complainant towards litigation costs.

The order also specified that if Omaxe fails to comply with the monetary awards within 30 days, the amount will attract a higher interest rate of 12% per annum until realization. The developer was also barred from charging any delayed interest on the remaining balance from the homebuyers, as the delay was attributable to the builder.